The Telecommunications Growth Agenda

BCG helps telecommunications companies create long-term value and growth through enhanced product offers, acquisitions, partnerships etc.

The traditional telco business model is under threat. Why? The market is becoming saturated, and the average revenues per user—for both fixed and mobile networks—are declining in many markets. At the same time, capital requirements remain high, and usage, especially in mobile video, is increasing dramatically. Long-term value creation in this environment can be difficult.

In the past, telcos have relied on reducing costs, expanding infrastructure, and maintaining or improving margins to ensure reliable growth. But clearly there is a limit to this strategy.

To generate long-term value for shareholders, operators can turn their attention to new growth areas, such as:

The challenge is that the emerging services arenas—cloud computing, mobile payments, messaging, digital, advertising, e-commerce, the Internet of Things, and more—are already heavily contested. Staying competitive depends on being selective about which opportunities to pursue.

The Digital Opportunity

Digital services, in particular, present an enormous opportunity for telcos. This industry—which covers 13 service areas from eHealth and smart metering to messaging, music, and video—is expected to grow to $948 billion globally by the end of 2015.

Telcos have several opportunities to capture a portion of that business:

  • Network. Digital service providers need to find cheaper, better ways to deliver. Partnering with telcos allows them to use existing networks.
  • Customer Base. Integrating digital services into cross-sell and up-sell activities is a logical way for telcos to create value.
  • Customer Data. Some digital services need the customer data and profiling that telcos are able to provide.
  • Brand/Distribution Power. In most geographies, telcos have good go-to-market capabilities, which are attractive to services that require trusted, local distribution.
  • Payment Relations. Telcos can act as payment intermediaries for services that can’t create their own payment solutions.
  • Distance from Silicon Valley. Silicon Valley developers will naturally focus on large markets first. Telcos can create local versions of some services and enjoy first-mover advantage.
  • Operational Efficiency. Digital technologies can create growth through productivity improvements and advocacy within the core business. In particular, a connected channel strategy can identify and capitalize on opportunities across digital platforms.